Mortgage Questions Asked and Answered
· Question: What credit score do I need to qualify for a home loan.
Answer: We can go into the 500’s, however the lower your score, the higher the interest rate. 620 is a starting point. Lenders like 680+ and the rates are more competitive at this score. A good way to check is using the free credit report at www.annualcreditreport.com. You can pull a free credit report and clean up and remove items. In addition, you can sign up for around $40 on Experian which pulls all three credit bureaus and gives you a score. On a high note, starting this year student loan repayment is does not impact the score as much as in the past.
· Question: What is a Pre-Qualification vs. Pre-Approval?
Answer:-A pre-qualification is an evaluation of your income, assets, down payment and goals to purchase or refinance. A loan officer reviews and using a formula calculates your debt-to-income ratio. This is a very minimal process and not one extremely worthy of time. Go for a pre-approval. This is the meat of the loan process. Your credit is pulled, reviewed and a complete loan application is taken including income, assets and all requested documents for your given scenario. Your loan file is ran through an Automated Underwriting System and receives a response. With an Approval, you can begin viewing properties and make offers under the premise you are Pre-Approved. A full pre-approval requires underwriting and removes loan contingencies on a California real estate contract.
· Question: When should I lock my rate?
Answer: This question is tricky because the market changes daily. I highly recommend locking as soon or before you have full loan approval on a purchase and the sooner the better on a refinance. I tend to swing more conservative on rate locks.
· Question: What is a CALHFA Home Loan?
Answer: CALHFA offers several options for home loans and down payment assistance. Borrowers must be eligible based on income and a variety of factors. There are First Time Homebuyer programs that have down payment and closing cost assistance. CALHFA has a website outlining all the details of their programs. We are an approved CALHFA lender. Click here for details on CALHFA programs.
· Question: What do you need from my tax returns?
Answer: We need the complete set of returns including all schedules for the year filed. All pages. Self-employed borrowers may have a separate return for the corporation or LLC.
· Question: What is an impound or escrow account?
Answer: This is an account the lender collects with your monthly payment to cover property taxes and homeowner's insurance. When purchasing or refinancing, the lender will request several months or more in advance be collected to cover these expenses. The benefit to an impound/escrow account is making one payment and having the lender allocate funds as opposed to handling the property taxes and homeowner's insurance yourself, separate from the mortgage payment.